Tax Cut Mania

Internal Revenue Service Building (cc photo by scotteric)
Economist Mom has an excellent head-banging-against-the-wall account of the insane tax cut debate unfolding in Washington today:
The fiscal policymaking in this town seems totally schizophrenic right now. What a juxtaposition to have President Obama’s deficit-reduction commission release its final report while the Administration “negotiates” with Congress on whether all of the Bush tax cuts, or just most of them, should be permanently extended (and deficit financed). The media has been reporting that whether the bulk of the Bush tax cuts will be extended or not is not the issue–it is whether the upper-bracket ones benefitting only the rich will be included as well, and what constitutes “rich.” (That floor may be moving up all the way to $1 million.)
Let’s remember that the permanent extension of “just” the “middle-class” Bush tax cuts, as President Obama has proposed, would add about $2.2 trillion to the debt over the next ten years–without interest costs and without the associated extension of Alternative Minimum Tax relief. Such extension would preserve the full value of Bush tax cuts for 97-98 percent of households while continuing to give the largest dollar value of tax cuts to those above the $250,000 threshold.
In other words, there’s no debate in Washington about whether rich people should get a permanent tax cut. Nor is there any debate in Washington about whether rich people’s tax cut should be financed by long-term borrowing. Nor is there any debate about whether rich people should get a bigger tax cut than middle class people. But we “can’t afford” unemployment insurance, we “can’t afford” to pay bank regulators competitive salaries.
We have a bipartisan consensus that the short-term deficit should be made smaller and the long-term deficit should be made bigger even when all the economic logic points in the opposite direction.

Related

Today I have an opinion piece on CNN.com which doesn’t say anything you haven’t heard me say here before (over and over again!), but it was awfully nice of CNN to invite me to publish it where it will certainly get more eyeballs. Here’s the opening:

By James Kwak
First, the comic relief. From the Times:
“Senator Jim DeMint, Republican of South Carolina, said that he still wanted the Bush-era rates extended permanently and that the cost of the package was worrisome.”

By James Kwak
There have been (admittedly unclear) indications from your administration that you may accede to the Republicans’ demand to extend the Bush tax cuts for everyone. I urge you not to do this.

The key word in the title of this post, from my perspective, is “alternatives”–not “additions.” The Obama Administration is reportedly considering some new proposals for a variety of business tax cuts that they believe would be particularly effective in creating jobs quickly. As the AP’s Julie Pace reports: